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DIY - Estate Planning
Category: Architecture and Buildings > Glossary of Estate Planning Terms
Date & country: 16/12/2008, US
Words: 150


Pour-over Trust
A trust designed to receive property that is 'poured over' into it. The property is usually 'poured over' or received from a pourover will through the probate process.

Pour-over Will
A will which contains a clause that transfers some or all of the assets that pass through the will into a trust for final distribution from the trust. The will's assets are said to 'pour over' into the trust.

Power of Appointment
The power given to a person, by appointment in a will or a trust, to distribute the property that passes through the will or trust at the discretion of the person appointed. Other than to give the appointed person the authority to make the distribution, the will or trust doesn't make distribution of the property.

Power of Attorney
A document established by an individual (the principal) granting another person (the agent) the right and authority to handle the financial affairs for the principal. A power of attorney becomes invalid at the death or incompetency of the principal, unless the power of attorney is a 'durable power of attorney' which remains in effect after the principal becomes incompetent.

Prenuptial Agreement
A contract between two potential marriage partners specifying how the property owned by each prior to marriage and owned individually or jointly during marriage will be divided should the couple divorce.

Primary Beneficiary
The person or persons for whose benefit a trust is originally established. When conditions change and the primary beneficiaries are no longer in a position to receive the benefit of the trust, the benefit goes to the 'secondary beneficiaries.'

Probate
The legal process which facilitates the transfer of a deceased person's property whether they leave a will or don't leave any will. The court establishes the authenticity of the will (if any), appoints a personal representative or administrator, identifies heirs and creditors, directs payment of debts and taxes, and oversees distributions of the assets according to the will or state law in the a...

Probate Court
The part of the judicial system dedicated to handling probate matters which includes settlement of intestate and testate estates, adoptions, appointment of guardians, name changes, and other matters.

Probate Estate
A deceased person's property which is subject to the probate process. Property held in a living trust is usually not considered part of the probate estate.

Probate Fees
The fees, often a percentage of the estate, paid to the attorney and others who handle the probate proceeding.

Proving a Will
The process of establishing the validity of a will before the probate court. (See Self Proving Will)

QTIP Trust
A Qualified Terminable Interest Trust (Q-Tip) is a type of trust which provides an unlimited marital deduction for qualified property put into the trust. However, rather than permitting the surviving spouse to have full power to distribute the property to anyone he or she wishes, the trust restricts the ability of the surviving spouse to distribute the property in the trust to a select group of in...

Quitclaim Deed
A document (a deed) that transfers a person's interest in a piece of real estate, without the warranties or guarantees that are made in a warranty deed.

Real Property
Land and attachments to the land, such as buildings, fences, etc.

Revocable Living Trust
See Living Trust

Revocable Trust
A trust which can be amended or revoked by the person(s) who established the trust.

Right to Die
The right to decide not to have life prolonged by extraordinary, artificial means.

Rule Against Perpetuities
A rule of law limiting the duration of a trust. Some trusts can go on in perpetuity (forever), but most types of trusts have a maximum duration or life established by law.

Section 2053 Trusts
A type of irrevocable trust, authorized by section 2503 of the IRS code, often established for children. Section 2503 allows annual gifts up to $10,000 to be made to the trust, rather than directly to the child, and still have the gift qualify for the $10,000 annual gift tax exclusion.

Self Proving Will
A will which has been properly witnessed (by either two or three witnesses depending on state laws) and the witnesses have signed an affidavit before a notary public stating that all of the proper formalities of the will's execution have been complied with. This usually makes it very easy for the court to 'prove' the will.

Separate Property
In community property states, all property which is not held commonly by a married couple is considered separate property. In general, it is property owned by one spouse in which the other spouse does not own an interest.

Settlor
A person who establishes a trust. The term settlor is used interchangeably with the terms 'trustor' and 'grantor.'

Simple Trust
Trusts that are established with terms that require the trust to 'pay' all of its income out, so that it does not accumulate income on which income taxes would have to be paid.

Spendthrift
An individual who cannot handle money wisely and spends it wastefully.

Split Gift
Each spouse is entitled to give any individual $10,000 in a calendar year and, provided it is given properly, there is no tax consequence to the giver or receiver according to the 'annual exclusion' laws. However, if a married couple tries to give more than $10,000 to an individual, they must file a gift tax form declaring that the gift is split between them. If the form is not filed, the IRS ca...

Spouse
Legal term for husband or wife.

Springing Power
A power to act on the occurrence of some certain criteria, such as an illness or incompetency. The power is said to spring into existence upon the occurrence of the event. The agent's power to act for the principal under a durable power of attorney is usually a springing power.

Sprinkle or Sprinkling Power
The power given a trustee to decide how, when and why to distribute trust income to the trust's different beneficiaries. The sprinkling power allows the trustee to 'sprinkle' the trust's income over the beneficiaries. It is a valuable power to give the trustee in irrevocable trusts because is allows the trustee to distribute income to the beneficiaries who will pay the smallest amount of incom...

Sprinkling Trust
A trust that grants the trustee a sprinkling power which allows the trustee to decide how, when and why to distribute the trust income among the trust's beneficiaries.

Stepped-up Basis
The new basis established for a property after the property has been evaluated and taxed as part of an estate. The new basis or 'stepped-up basis' is the value of the property used to assess the estate tax.

Successor Trustee
The trustee who takes over when the initial trustee can no longer function.

Surviving Spouse
The husband or wife that lives after the death of his or her spouse.

Taxable Estate
The portion of an estate that is subject to federal estate taxes or state death taxes. Technically, all of an estate is subject to federal estate taxes, but because of the unified credit, only estates with a value over the exemption equivalent amount actually have to pay any estate taxes (see Appendix 1). Therefore, it is common to refer to an estate with a value over the exemption equivalent amou...

Tenants by the Entirety
A way of owning property which, for almost all practical purposes, is the same as joint tenants. Tenancies by the entirety are creations of state law and are used only between husbands and wives, whereas joint tenancies can be used by anyone, not just by husbands and wives, who wants to own property jointly.

Tenants in Common
A way of owning property in which two or more owners all 'share' ownership of the property. The owners can own various percentages of the whole property, unlike joint tenants which each own an equal share. When one owner dies, his or her share does not 'automatically' go to the other owner(s), because tenancies in common do not have a survivorship provision like joint tenancies.

Testamentary Trust
A trust created by a will.

Testate
One who dies leaving a will.

Title
Document proving ownership of property.

Totten Trust
A bank account that is designed to get around probate. The account is created by a person in his or her own name as the trustee for another person. It is a type of revocable trust until the creator dies, then it is paid out to the designated beneficiary(ies).

Trust
A legal document in which property is held and managed by a trustee for the benefit of another known as a beneficiary. A trust is a relationship in which property is held by one person for the benefit of another. The trust can be created verbally, but will most often be in writing.

Trust Certificate
A summary of the trust's terms prepared by an attorney that evidences the trust exists.

Trust Corpus or Res
The property of a trust.

Trustee
The person or institution that manages the trust property under the terms of the trust.

Trustor
A person who establishes a trust. The term trustor is used interchangeably with the terms 'settlor' and 'grantor.'

Unified Credit
A tax credit is given to each person by the IRS to be used during his or her life or after his or her death. The tax credit equals the amount of tax (gift or estate) which is assessed on the exemption equivalent value of property. It is considered the 'unified' credit because it applies to both gift taxes and estate taxes and results from the IRS's effort to unify these two taxes or make them c...

Uniform Gift to Minors Act
A series of state statutes that provides a method for transferring property by gift to minors who cannot legally manage the property for themselves. The laws allow an adult to manage the property and yet not have it owned by the adult.

Uniform Probate Code
A standardized code designed by the American Law Institute to streamline the probate process. Many states have not adopted the code as part of their laws.

Unlimited Marital Deduction
The tax law that allows a person to give an unlimited value of property as a gift, or leave an estate of unlimited value to his or her spouse without a gift or estate tax being assessed.

Warranty Deed
A deed which warrants that certain contracts will 'run' (continue) with your property.

Will
A legal document stating the intentions of a deceased person concerning the distribution of his or her property, and management of his or her affairs following his or her death. State law dictates the legality of a will.